Volume off the high- don't catch that knife

I really do not have an objective comparison for this statement, but there seems to be a large number of stocks hitting volume off the highs, both the initial screen and after my review. In addition, many of the companies making the cut are large-cap, well known names. It also seems to be in a broad mix of sectors including transportation, technology, energy, and retail. Does this mean anything going forward? Possibly? In any event here are the list of companies hitting volumes off the highs.

Clarcor- CLC

 Cheniere Energy- CQP

 Fedex- FDX

 Georgia Gulf- GGC

 Carmax- KMX

 Louisiana Pac- LPX

 Norfolk Southern- NSC

 Suffolk Bancorp- SUBK

 Skyworks Solutions- SWKS

 Thermon Group- THR

These names do not necessarily indicate the stock is heading South, but in my experience a stock selling off on heavy volume after approaching near-term highs is an indication that the large operators know something. It is an indication of building selling pressure. The continuing list can serve as a warning to focus your research on holdings that may crack or inversely be a place to look for short candidates.

Intervention cause problems-Rothbard

S&P 500 and inflation expectations

I want to further expand on my discussion and analysis of the U.S. equity markets and their increased correlation with light sweet crude. One of the reasons I gave for the increase in the positive correlation was monetary stimulus and inflation expectations. This discussion can be found here. Well, I took the analysis one step further and I compared the S&P 500 versus inflation expectations, the later defined as the spread of 10-year treasuries and 10-year Treasury Inflation Protected Securities. Here are three charts that I found enlightening. The rolling 1-year correlation of the 13-week percentage change in the S&P 500 and the change in inflation expectations. The rolling 3-month correlation of the 13-week percentage change in the S&P 500 and the change in inflation expectations. Finally, the 13-week performance of the S&P 500 and inflation expectations.

What I think is interesting about these charts is that the prior to the bear market of 2008, the rolling 3-month correlation was erratic while the rolling 1-year correlation was predominantly negative. This can also be seen in the performance of the S&P 500 versus the inflation expectations (the bottom chart). Prior to 2008, peaks in equity market performance appeared to coincide with troughs in inflation expectations and vice versus.

Since 2008 however, the correlation has increased. Both the 3-month and 1-year correlation of the S&P 500 and inflation expectations has been upward sloping. This relationship is also seen in the performance of the S&P 500 and inflation expectations, as both measures began to move, more or less, in tandem following the 2008 bear market.